Advertisers Spend Big on iPad, But Potential Far From Proven

Hoping to capitalize on the massive hype surrounding the launch of Apple’s iPad device, major advertisers have forked out substantial sums to align themselves with some of the dedicated applications now on offer.

According to reports, and echoed by interactive agency sources in New York, advertisers are spending between $75,000 and $300,000 to secure sponsorships of applications at launch, typically for a period of one or two months.

For example, the Wall Street Journal’s paid application launched last week with sponsorship from major global brands including Buick, Capital One, Coca-Cola, FedEx and Oracle, all of which will make use of full-screen interstitial ads which appear in between article and section pages as the user consumes content through the application.

Similarly, the New York Times has launched a free application featuring exclusive sponsorship from Chase Sapphire, and plans to stick with the exclusive sponsorship model “for the first few months,” a spokesperson said.

However, the investment is potentially risky from a marketer’s perspective, and the long-term potential of the platform is yet to be proven.

Jason Klein, co-president of interactive agency LBi U.S., said the high-profile sponsorships are just attempts to capitalize on the hype surrounding the device. “It’s not necessarily a matter of the immediate impression impact. Reach and frequency take a back seat to the novelty and PR impact of being associated with a launch like this.” he said.

Klein noted some campaigns are being bought on a fixed rate – similar in a way to a newspaper display ad buy. In that sense, he suggested advertisers are taking a risk, since users may choose to make use of the New York Times’ free application over the Wall Street Journal’s paid one, for example.

“There are many channels where you could leverage those dollars in a safer and clearer framework. Even if penetration becomes significant, there’s still an onus on ad providers to show real return on investment. The jury is still out in terms of the value it will provide to marketers in the medium-term,” he said.

Despite the limited reach the device and associated applications currently offer, David Bear, director of mobile and social media at agency Atmosphere Proximity, was enthused by the creative opportunities the device may afford advertisers. “In-app ad opportunities are going to be a great new step because of the richer and broader experience advertisers will be able to have. Richer applications and the size of the screen should allow for really great ad opportunities,” he said. Indeed, ads for Chase Sapphire on the New York Times application will make use of the device’s accelerometer function, allowing users to tilt it to activate the ad, a spokesperson said.

Alongside newspaper publishers, media companies such as Yahoo and CBS have also launched either dedicated applications or online content that is compatible with the device. Neither CBS nor Yahoo’s offerings currently include advertiser opportunities, although a Yahoo spokesperson said it wants to help “rethink the ways in which advertisers integrate themselves within content.” A CBS spokesperson said it intended to have pre-roll ads running alongside its iPad-enabled video content in the next couple of months.”

Besides the brands that jumped on board early to make the most of the iPad launch, other advertisers appear to be looking at the platform more cautiously. For example, Klein said his agency had been in discussions with clients surrounding possibilities in the area, but that none were ready “to spend a six figure sum on an unknown, untested environment.” He added, however, that he was keeping a close eye on the development of applications for the device. “It’s a question of how do you take advantage of the hype, but not get caught up in it. It’s healthy to be excited, but its also smart to be somewhat restrained about it,” he said.

Bear said he too had been in discussions with clients, but echoed Klein’s concerns about scale. “Clients are all going to want pretty quickly point of view on what the opportunities are, but the benefits of reaching this platform will ultimately have to do with what kind of scale there is,” he said.

Never late to the party, Google also confirmed on Friday that it will enable advertisers to reach iPad users specifically through its AdWords product.

Both Klein and Bear also expressed interest in a possible forthcoming mobile ad format from Apple, rumored to be built on top of the Quattro Wireless network it acquired in December. Both executives suggested it could make use of location-based information, and that it would likely be scaled to the iPad as well as the iPhone. No concrete details have been confirmed.

The rise of YouTube and digital video generally has a lot to do with the rise of the internet and the abundance of digital video content. But YouTube's ascendency is also the result of Google's savvy use of algorithms.

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